Draft Amendment of the Insurance Supervision Ordinance Published


On May 17, 2022 the Swiss Federal Department of Finance published the text of the draft amendment of the Ordinance on the Supervision of Private Insurance Undertakings (Insurance Supervision Ordinance), thereby opening the relevant consultation process. This represents another important step towards the implementation of the partial revision of the Insurance Supervision Act adopted by Parliament on March 18, 2022 (expiration of the referendum deadline: July 7, 2022).

On 17 May 2022, the Federal Department of Finance published the text of the draft amendment of the Ordinance on the Supervision of Private Insurance Undertakings (Insurance Supervision Ordinance; ISO).

The consultation period will run until September 7, 2022. The revised ISO is therefore not expected to enter into force before July 1, 2023.

The revised Insurance Supervision Ordinance addresses the changes contemplated in the partial revision of the Insurance Supervision Act, in particular the implementation of simplifications to, and the exemption of, small insurance undertakings from supervision, the introduction of rules of conduct in connection with the distribution of qualified life insurance policies, as well substantiating the requirements for the insurance special purpose vehicle.

The following changes are, in our view, particularly noteworthy:

Implementation of a special supervisory regime for small insurance undertakings

(art. 1c-1g E-ISO)

The revised ISO gives the Swiss Financial Market Supervisory Authority FINMA (FINMA) the power to grant small insurance and reinsurance undertakings supervisory relief or exempt them from supervision completely, based primarily on their balance sheet total on a statutory basis;

Definition of criteria for the determination of transactions with and without connection to the insurance business

(art. 5b and 5c E-ISO)

Art. 5b E-ISO sets out the criteria for transactions that are considered insurance-related and can therefore be conducted by insurance undertakings without obtaining a separate FINMA authorization (cf. art. 11 nISA).

In accordance with art. 11 para. 2 nISA, Art. 5c E-ISO determines the conditions for FINMA to authorize insurance undertakings to conduct non-insurance related business, i.e. transactions without a connection to the insurance business: (a) no risk to the interests of insured persons, (b) control over the risks associated with such transactions, and (c) no disproportionate additional burden on FINMA’s supervision (as would be the case for highly complex transactions).

Complete revision of Title 3 regarding solvency requirements

(art. 21 et seq. and art. 51 et seq. E-ISO):

As set out in art. 9-9c nISA, the revised E-ISO includes additional rules regarding solvency, in particular with respect to (1) the level of protection to be sought with regard to insolvency risks, (2) the risk-bearing capital, the target capital and their determination (in particular market consistent valuation) and (3) the thresholds for taking protective measures pursuant to Art. 51 nISA (so-called «intervention thresholds»).

Privileged treatment of tier 1 risk-absorbing capital instruments

(art. 37 E-ISO):

Art. 37 E-ISO introduces requirements for «high-quality» equity capital (Tier 1). These rules are intended to expand the range of refinancing options for insurance undertakings and to create incentives for insurance undertakings to issue higher-quality capital instruments. Risk-absorbing capital instruments in Tier 1 can be credited to the core capital up to a maximum impact of 20% (art. 34 para. 5 E-ISO). The previous distinction between upper and lower supplementary capital is replaced with the classification of risk-absorbing capital instruments into Tier 1 and Tier 2 instruments (art. 37 para. 1 lit. c E-ISO).

Specification of rules applicable to insurance special purpose vehicles

(art. 111d ff. E-ISO)

The basic supervisory requirements applicable to the new concept of insurance special purpose vehicles are found in 30e and 30f nISA. The implementing provisions in Art. 111d ff. E-ISO are intended to ensure a liberal implementation at the level of the ISO.

Introduction of product-specific information requirements in connection with qualified and non-qualified life insurance products

(Art. 129a et seq. E-ISO)

In addition to the information obligations set out in the Insurance Contract Act, insurance undertakings will be required to inform insured persons about certain risks in connection with life insurance products, both with and without investment risk. For life insurance policies with investment risk (so-called qualified life insurance policies), insurance undertakings will also have to provide an individualized sample calculation to the insured, disclose third-party compensation and prepare a basic information sheet.

Modernization of rules regarding insurance intermediation

(Art. 182 et seq. E-ISO):

With a view to technology-neutral regulation, the revised ISO also deems internet «insurance comparison platforms» as insurance intermediaries within the meaning of the ISA. In addition, the revised ISO clarifies that advisory activities or the performance of essential preparatory actions in connection with insurance policies may also be considered insurance intermediation (Art. 182 E-ISO). Another significant change the requirement for not-tied / independent insurance intermediaries to comply with certain minimum corporate governance standards (Art. 188 E-ISO).

For further information, please refer to the press release issued by the Swiss Federal Council, the draft amendment of the ISO and the corresponding explanatory report available at the following link:

Press Release – Amendment ISO (available in German, French and Italian).

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